While starting a new job and graduating from college is exciting, managing adult responsibilities like taxes can be difficult. Most students rely on their parents to pay their taxes while in college, so many students are unprepared to file their taxes after graduation.
Young Americans, many of whom graduate from high school or college without having received a formal financial literacy education, may find filing tax returns particularly overwhelming. But everyone is required by law to pay taxes, even if they don’t feel like they’re ready to. Tax forms may appear complicated and intimidating at first, but it is critical to take the time to understand them, whether by researching taxes, seeking assistance from a family member, or hiring an accountant or tax preparation service.
When Are Your Taxes Due?
It’s crucial to understand some fundamentals before starting the tax filing process.
Tax Day is usually on April 15, but it may be moved if April 15 falls on a weekend or a public holiday. The IRS hasn’t officially announced the date for 2023, but because April 15 falls on a Saturday, it will most likely be moved to the following week. Taxes due on Tax Day are those for the previous calendar year that ended on December 31.
In January, the W-2 and other important tax documents needed to file your tax return begin to arrive in the mail or become available online. If a refund is expected, file a tax return as soon as possible to get your money back. If money is owed, pay it by the deadline.
Since income, tax laws, and other variables are always changing, it’s common not to know in advance how much tax must be paid and if one is eligible for a refund. Consequently, even if a refund was given the previous year, it doesn’t necessarily imply that it will happen this year. There is also no certainty that the refund or tax obligations will be in a similar range to those from the previous year.
Some Important Tips
To make taxation easier, here are some tips that can help make this daunting task a bit easier:
A) Start Early
Taxes should be started in January to ensure readiness for Tax Day. The reason is that filing taxes requires a lot of different components, including forms and numbers that one must have on hand. So, starting early, when the forms arrive, gives enough time to find all the pieces, seek professional help if needed, and file taxes on time.
B) Know Your Classification
Employees and independent contractors have different tax-reporting procedures, so it is critical to understand which category to fall into. As an employee, the W-4 form is filled out when starting the job and receive a W-2 form later in the year. If payment is done as a 1099 independent contractor, subcontractor, freelancer, gig worker, or sole proprietor, it must be reported and paid as self-employment taxes. The w-9 form must be completed and will receive 1099 at the end of the year. Self-employed individuals are responsible for handling those payments on their own since taxes are not deducted from their paychecks.
C) Are You Claimed As A Dependent
If an individual is still in college, living with parents, or receiving substantial financial support from them, the parents may claim them as a dependent this year. Parents will benefit from tax breaks as a result of this. If this is the case, then it must be declared during the filing of the return.
D) You May Be Required To File A State Tax Return
A state tax return must be filed in addition to a federal tax return if the individual resides in a state that levies them. Some states have a single state-wide income tax rate. Some have graduated rates. A few states only tax investments such as dividends and interest, while others do not. In addition, depending on marital status, income may fall into a different tax bracket.
E) Create A Checklist Of Documents
The documentation required varies depending on the individual. Social security number, bank account number, W-2 form, 1099 form, Income from investments, Receipts, Property tax records, Health-care coverage tax form, and a few others may be required to file taxes.
Consider Hiring A Tax Expert
Filing taxes is possible, but it takes time. The amount of free time one has, the cost of hiring a tax professional, the complexity of the taxes being filed, and the number of accounts to manage can all influence whether or not one chooses to invest in a tax professional.
Hiring a tax professional right after college may be the best way to understand managing finances. FindUSCPA.com is a free marketplace for individual taxpayers and US businesses to find US licensed tax and accounting professionals across the globe for all of their needs. Just add the tax and bookkeeping issues as a project and have an enrolled agent or a certified public accountant look over it and send a quotation. It’s that simple!
The tax laws are very complex. Our short blog articles cannot cover in full all the nuances of the rules. Your specific facts may hold various opportunities and possible risks that only trained, experienced, and highly qualified tax specialists can spot. We encourage you to find such help, rather than trying to figure it all out on your own. Consider giving this marketplace a try by posting your project and signing up here.
If you are a licensed tax professional and are interested in helping others either part or full-time, or ad hoc, come on in! Happy to have you. Our marketplace has the full suite of tools to communicate with clients including compliance calendars, task and message management, and billing. You can also quickly connect to knowledgeable colleagues who can complement your services with the ones you do not provide. Register here